January 6, 2017

Brazilian Farmers have only Sold 34% of their Anticipated Soybeans

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Brazilian farmers do not appear to be in any hurry to sell their anticipated 2016/17 soybean production. According to AgRural, Brazilian farmers have forward contracted 34% of their anticipated 2016/17 soybean production compared to 44% last year at this time and 40% average.

The slow selling is no surprise given the lower soybean prices being offered compared to last year. At the Port of Paranagua in southern Brazil, buyers on Wednesday were offering R$ 74.52 per sack (approximately $10.50 per bushel), which is down 24% from the high in June of 2016 and 9% below prices being offered on January 4, 2016.

One of the reasons for the lower prices is the exchange rate between the Brazilian real and the U.S. dollar. The Brazilian currency was trading at more than 4 to 1 compared to the dollar in January of 2016. It is currently trading at 3.2 to 1. A stronger local currency generally results in lower domestic prices.

With these lower prices, buyers are being forced to offer higher premiums in an effort to entice Brazilian farmers to sell their early harvested soybeans. They are currently offering approximately $ 0.57 per bushel over the nearby contract at the Chicago Board of Trade for February delivery. Last year at this time, the premium was approximately $ 0.30 over the nearby contract on the Chicago Board of Trade.

Even with higher premiums, it is proving hard to get Brazilian farmers to sell their soybeans. As a result, farmers will be forced to sell more of their crop at harvest time when premiums and prices are expected to decline further. The early soybean harvest has started in central Brazil and more soybeans will be available in January than in recent years, which should also put pressure on domestic prices.